Barilla Case The JITD initiative at Barrila drew a lot of internal and external objections which made it unsuccessful

in terms of implementation. An in-depth analysis of the Barrilas case reveals the various sources of objections. As an attempt to solve the traditional problems within the uncertainties-affected supply chain, the JITD idea is commendable. But the problem lies in its lack of tactics to win the stake-holders support. But the problem lies in its lack of tactics to win the stake-holders support. Possible solutions corresponding to different aspects of problems are discussed along with the problem analysis. Finally, a stake-holder consortium based on a real-time vendor managed inventory system is suggested.

Problems and Possible Solutions

The problems that JITD intends to solve: Demand fluctuation and low customer fill rate: As the Exhibit 12 showed, the demand variability is huge. On the other hand, the production line of Barilla can not afford frequent changes in order amount due to the long setup process. It comes out that if the forecast is unreliable, they will either need to build up huge inventory or lose the customer fill rate, none of them is favorable. Also, the Barilla customers will face stockout due to the low fill rate of Barilla. Another reason could be the big order policy (refer to Conflicts internal to Barilla) makes GD/DO stockouts by buying the wrong product a lot but having no extra space or money to buy the correct product to meet the demand. High Inventory at distributors and No Space or further investment available : As Exhibit 13 shows, the distributors have huge inventory and stockouts rate, which indicates that new product keeps coming out while old products still keep their spaces. Advantages of JITD: Decrease the Total Inventory in the Whole Supply Chain: JITD helps to reduce inventory held at the distributors since it builds inventories at the central warehouses and then delivers only the quantities required by the end-users through checking inventory at the distributors more frequently. Theoretically, it eliminates the needs for each distributor to hold it own Safety Buffer which causes demand fluctuation. Therefore, it benefits the distributors through releasing their inventories space and cost. Actually, the distributors will be more competitive to react to the demand variability, such as, new product, after season stocketc. Better Customer Fill Rate both in Barilla and the Distributors: JITD emphases quick response. Since the inventory data and delivery pattern are controlled by Barilla, their central factory and CDCs are therefore easier to schedule their production and deliveries to meet the customer

demand. For the distributors, since their flexibility and reaction speed have all been increased due to the lowered inventory level, they surely could have better customer fill rate and less stockouts rate than before. Further Distribution and Manufacturing Cost Reduction based on Scheduled Production (less hurry orders interruption): As mentioned before, Barilla has long changeover time to setup for another product. The less interruption, the more cost-efficient. But this is only true for bottleneck machines. This is also true for distribution cost. In contrast to the fluctuating due to unknown situations in the past, a better delivery schedule could be built by using complete data obtained from the end-users. Drawbacks of JITD: Inventory could increase at Barilla: The concept comes intuitively that if Barrila reduces the inventory from the distributors, supposing the total inventory of the whole supply chain is fixed, it has to increase its central inventory to meet the customers demands. [Solution] We all know that inventory level depends on order quantity and lead-time. According to the case, CDC now holds one month inventory while DC and GC hold about 2 weeks and small shops over 2 weeks. We also know that supermarkets place order every day, which provide the distributors with plenty of information. Therefore it is possible to reduce the inventory by shortening the review period, say 3 days instead of current once per week. If the distributors inventory could be reduced to one week or so, the CDCs inventory will also have room for reduction. The lead-time is too long: Now the average lead time is 10 days and varied from 8 to 14 days. If the lead-time could not be shortened, it will considerably affect the response time to customer orders. It is necessary to check if there is any problem with the transaction time or transportation time (It can be related to the promotion plans or the distribution plans). Give competitor more distributor shelf space: If the shelf space is released at distributor level by JITD, chances are that the distributor might stock more competitors products. [Solution] Maybe Barrila could make a deal with the distributors that the additional space is for Barrilas new products only. Hard to Perform Trade Promotions: JITD encourages the distributors to buy less each time while at a more frequent rate. However, the trade promotions stand in the opposite way (refer to internal conflict -- promotion plan) [Soution] Using aggregate volume promotion of one year quantity instead of quantity on each order + EDLPP(everyday low purchase price) promotion. JITD Relies on the customers to input data. But what if the customers are not able or not willing to give the right data? As the case indicates, most distributors are not ready for the point-ofsale system. And they are not willing to give other people their sensitive sales data. If Barrilla rigidly

demand data from them, the data could be fake and therefore lead to bigger mistakes (refer to customers concern) [Solution] Try to starting from their problem and show them both the benefit (if we can work together) and drawback (if we dont work together) of JITD instead of pushing our plan). If the whole supply chain rely on Barilla, what if some unexpected disturbance, said strike, happen? To reduce the inventory from the distributors level means that the whole supply chains safety stock relies on Barillas CDC. But we all know that being out of stock is much riskier to lose customers than over stock. Are they strong enough? [Solution] Using statistics number to explain. It would be very good if we can have fill rate of 99%. But obviously we can not afford a100% fill rate, and we dont expect it. Conflicts internal to Barilla

The current promotion and discount policy VS. JITD: Currently Barilla divides each year into 10 or 12 "canvass" period with each corresponds to a promotional program. The incentives for the Barillas sales representatives lie on achieving sales goal for each canvass period. Therefore they are actually welcoming distributors to buy as much as possible. Besides, one of the representatives sales tools is volume discount for both full-truck-load and larger volume orders. This, to some extent, encourages distributor to order less frequently with larger order quantity every time. But the JITD promoters think that although the above two aspects decrease Barilla's CDC inventory level at current period, the distributor's inventory level will increase considerably. from a long term point of view. [Solution] Instead of giving discount for big order volume, we would give discount for stable longterm orders (EDLPP). By doing so we could have many reliable long-term orders to fill the market demands, and the fluctuation could be reduced considerably. And, if distributors are ordering more at a time and less frequently, it actually will cause demand fluctuation

The sales representatives role in the DO system: With the current system, the sales representatives are playing important roles in DOs, which take about 20% (0.65*0.3) of Brillas dry product sale. They coordinate among DOs, CDCs and distributor buyers to solve problems and settle disputes. The sales representatives will be concerned that their responsibilities would be reduced if JITD is put in place. [Solution] Since each representative carries a portable computer for imputing the distributors orders, we could install a system by which more information at the distributor's warehouse level could be collected by the sales representative working at the front line. By doing so, the sales representative will still play an important role in the new system, meanwhile saves the distributors work in

implementing the JITD, and therefore encourages them to participate in JITD. We just need to get the distributors permission for releasing data, and our sales representatives will do the data collecting and inputting work. Barillas customers concern: As one of Barillas customer, the response to Barillas JITD proposal would be a combination of the following emotions:

Sense of defense. How could Barilla demand sales data from us which are considered confidential? Does Barilla have the authority to do this? Are they intending to monopoly the supply chain? If we release our sales data to Barilla, will this information go to our competitors? These doubts will result in defensive actions such as procrastination in responding to Barillas request or refuse to cooperate.

Sense of losing control. If it is left for Barilla to decide how much we need and how much should be shipped to us, we will lose control of our inventory. Besides, Barilla will base its daily distribution amount to us on the information of our sales amount and inventory level as well as similar information from our peer distributors. This does not seem to be a robust approach because their criteria for quota distribution is vague and subjective. It is easy to cause unfair treatment. What if we need to order more due to a sudden market surge? Will we be granted more shipment? As a protection, we might intentionally alter sales data and inventory level reported to Barilla whatever is advantageous to us.

Sense of burden.

Barilla requires us to report to them our inventory level and sales amount

everyday, which contradicts our periodic/weekly review policy and will add extra burdens to our staff. Will Barilla pay for the extra cost incurred? We might require Barilla to pay for the extra staffing cost. Besides, since information is money, Barilla needs to pay for our regularly provided information.

Sense of distrust. It seems that Barilla thinks that it can do a better job than us in managing our inventory. Their greatly reduced shipping amount to our company indicates that they think our predictions in the past are not correct. As a counter action, we might refuse to provide past sales data to Barilla so that they will have difficulties in predicting the market demand.

Confusion. Barilla seems to think that the problem of the supply chain lies in inaccurate projections. But actually the reason lie in their long lead time of their delivery as well as the remarkable variance in their delivery time, therefore we have to build inventory buffers to shield from their uncertainties. They should improve their service first. As a counter action, we might ask Barilla to deliver goods within 24 hours although we know it is not possible.